Dr Ernest Addison, BoG Governor

The Bank of Ghana (BoG) has indicated that banks are in a stronger position now to meet depositors’ withdrawals for readily available cash amid the coronavirus pandemic.

According to its March 2020 Banking Sector Report, the central bank said the ratio of core liquid assets (mainly cash and due from banks) to total deposits improved to 37.3% at the end of February 2020, from 35.6% the same period last year.

In addition, the ratio of core liquid assets to total assets improved to 24.2% from 23.5% over the period.

The BoG said the strong liquid assets to deposit ratio suggests that almost 93 percent of all deposits could be repaid from liquid assets (including investments).

It also said solvency also remained strong with a Capital Adequacy Ratio of 20.2 percent at the end of February, well above the prudential limit of 13%.

This stronger solvency position, the Central Bank maintained, enhances the ability of banks to deepen financial intermediation and strengthen capacity to absorb potential losses from credit, operational and market risks.

As part of the policy response to minimize the risks associated with the COVID-19 pandemic, the Bank of Ghana lowered the prudential limit from 13.0% to 11.5%.

The BoG said the policy’s intention is to remove constraints that the high prudential CAR could pose in extending credit to the critical sectors of the economy, to support efforts at containing the COVID-19 pandemic.

Looking ahead, the Bank of Ghana said the COVID-19 pandemic poses a major risk to asset quality.

However, the recently announced measures could help moderate any potential deterioration in asset quality